Q4 2024 NerdWallet Inc Earnings Call
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Speaker Change: We intend to use our investor relations website as a means of disclosing certain material information and complying with disclosure obligations under SEC regulation FD from time to time.
As a reminder, today's call is being webcast live and recorded.
Speaker Change: Before we begin todays remarks, and question and answer session I would like to remind you that certain statements made during this call may relate to future events and expectations and as such constitute forward looking statements.
Speaker Change: Actual results and performance may differ from those expressed or implied by these forward looking statements as a result of various risks and uncertainties, including the risk factors discussed in reports filed or to be filed with the SEC.
Speaker Change: We urge you to consider these risk factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances.
Speaker Change: Should you be aware that these statements should not be considered you should be aware that these statements should not be considered a guarantee of future performance. Furthermore, during this call. We will present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, except where we are unable without reasonable efforts to calculate.
Speaker Change: Certain reconciling items with confidence.
Speaker Change: With that I will now I'll turn it over to Tim Chan, our co founder and CEO Tim. Thanks.
Tim Chan: Thanks, Caitlin <unk> wallet, we closed 2024 strong and Q4, we exceeded our expectations growing revenue, 37% year over year to $184 million and delivering $17 million and non-GAAP operating income.
Tim Chan: We attribute our performance to our ability to deliver on continued consumer and partner demand and insurance, which grew over 800% year over year.
Tim Chan: We also saw a 5% year over year growth in banking products. Despite declining savings accounts rates as our final improvements drove outsized impact versus our expectations.
Tim Chan: These wins in insurance and banking more than offset softness in other parts of our business as.
Tim Chan: As 10 year rates rose throughout the quarter, we saw headwinds across both consumer and SMB lending, while we grew our mortgage business, 4% year over year separate from our acquisition that next door lending.
Tim Chan: The nearly 80 basis point increase in 30 year mortgage rates since the beginning of Q4 has tempered our growth expectations for this area of our business at.
Tim Chan: At the same time, our personal lines business ended the year down 51% year over year as we focused our efforts on insurance. However, as we shifted resources exiting the year to capture increased partner and consumer demand early results suggest a return to year over year growth in Q1 with.
Tim Chan: With lending remaining tight we also saw a revenue decline year over year and F&B, but we expect to see recovery when the broader lending environment improves.
Tim Chan: At the end of the year is a natural time to reflect on what we have learned and where we go next and previous letters I've written to you about <unk>, while it's work to build direct engaged relationships with consumers and smbs and our trusted financial ecosystem.
Tim Chan: We are prioritizing driving more engaged users not more users and our internal operational focus is aligned with this goal.
Tim Chan: As we embark on a new year, we are evolving how we talk about our business and performance to better reflect our focus and opportunities.
Tim Chan: Specifically, we are transitioning away from our monthly unique user disclosure.
Tim Chan: While this metric was useful for sizing our opportunity is solely a digital marketplace business. It does not reflect our transition over the past two years towards focusing on higher quality relationships, rather than a higher quantity of relationships.
Tim Chan: Our acquisition of extra learning to illustrate the opportunity we believe it will be more valuable to convert even a small percentage of our existing mortgage traffic in the brokering relationship then to triple our education oriented mortgage traffic right.
Tim Chan: While we are confident that we can meaningfully grow and you use year over year. This would require re prioritizing our operational focus and would be far less impactful long term that our vertical integration and re engagement initiatives.
Tim Chan: Our strategic focus on driving engaged users will also start to influence our thinking about customer acquisition costs.
Tim Chan: While our core marketplace business will continue to optimize for in quarter profitability recent.
Tim Chan: Our recent progress and our higher lifetime value driving growth pillars vertical integration and registration and data driven Reengagement may reorient, how we consider and disclose the balance between in quarter profitability and new customer acquisition costs for those initiatives.
Tim Chan: With that said in Q4, we delivered $19 million and you use down 20% year over year. This is consistent with the expectations. We shared last quarter. When we anticipated continued headwinds in organic traffic growth to non monetizing pages, we expect eventual stabilization and a return to growth by early 2026.
Tim Chan: But in the near term, we foresee getting a few points worse than Q1.
Tim Chan: I feel confident that we are well positioned to drive significant progress toward our vision in 2025.
Tim Chan: We've already started with our latest brand activation debuting a new national campaign at the Super Bowl on February nine and introducing millions of new consumers to <unk>.
Tim Chan: We also made important strides over the course of 2024 to build direct engaged relationships with consumers and smbs, providing us with a solid foundation on which to build this year through additional investments.
Tim Chan: Our land and expand efforts increase the breadth and depth of our guidance extending <unk> reach to new categories geographies and platforms in 2020 for Atlanta and expand initiatives saw us firmly establish our presence in Medicare, which in Q4 and more than doubled revenue year over year.
Tim Chan: This year, we also launched our first comparison shopping marketplaces in Australia and grew the organic reach of our social and broadcast platforms to 14 million views and downloads of particular note. This quarter, we strengthened our smart money podcasts and social audiences by providing consumers with helpful guidance on both timely topics like the election and ever.
Tim Chan: Green topics like budgeting.
Tim Chan: Of particular note in Q4, we saw over 200% year over year growth and organic video views on Instagram and Tic Tac following a decision earlier in the year to invest more in this content.
Tim Chan: Vertical integration is a key hypothesis for driving engaged users.
Tim Chan: These experiences parent <unk> trusted brand and distribution advantage with best in class experiences that tend to establish direct relationships with consumers and Smbs and we can then re engaged in the future with timely personalized offers.
Tim Chan: In 2024, we continued to relentlessly improve our concierge and SMB using machine learning to route customers to the appropriate experience for their needs leveraging AI to improve the team's efficiency and refining our reengagement strategy to drive our renewal business.
Tim Chan: Vertical integration in Q4 centered primarily on our acquisition of next door lending and executing our integration strategy.
Tim Chan: This has included integrating next door and leaning into our digital marketplaces that allow users to match with mortgage providers.
In addition in January we built no dwell at mortgage experts and <unk> branded experience that enables shoppers to conduct with next door lending as an option for users who want to do it firming experience to find the right mortgage for them.
Tim Chan: I am really excited about what <unk> wallet mortgage experts offers our consumers comparing 60 mortgage lenders on their behalf and I challenge anyone to find a better rate or better service and such a complicated transaction.
Tim Chan: Similar to vertical integration registrations and data driven engagement, where it is geared towards building experiences that encourage consumers and smbs to registered with <unk> wallet and connect their data, enabling us to surface personalized guidance and drive future revenue through Reengagement and.
Tim Chan: In early 2024, we launched <unk>, plus our subscription membership product, which rewards consumers for smart money moves and provides access to unique deals and rates. Subsequently we have developed engaging features like a treasury bills account and our insurance assistant, which analyzes users existing policies and automatically shops or better options if available.
Tim Chan: At the same time, we continued investing in past to registered users growing our cumulative registered user base to $25 million in 2024.
Tim Chan: Before I hand, it over to Loren I want to thank her again for our partnership over the past four years as we announced in October and Loren will be stepping down in March to pursue other opportunities and I am excited to share that she will be succeeded by John Lee John joins <unk> from Debbie homes, where he served as their chief financial Officer, and Chief operating Officer.
Tim Chan: Earlier in his career John held private equity roles at Blackstone and TPG I believe his expertise and leadership will help us take the next step in our growth journey as we increasingly pursue vertical integration and other re engagement strategies to build engaged relationships with more users in the meantime, though thank you again to Lauren and I will pass it over to her for a discussion.
Tim Chan: <unk> of our financial performance in Q4.
Lauren: Thanks, Tim we ended the quarter above our revenue guidance range, delivering Q4 revenue of $184 million up 37% year over year.
Lauren: We also delivered full year revenue of $688 million, a 15% increase versus prior year.
Lauren: Our revenue growth was primarily driven by another quarter of significant strength in our insurance vertical as well as a return to growth in banking. So we continue to face a cyclically depressed lending environment.
Lauren: Let's take a deeper look at the revenue performance during the quarter within each category.
Lauren: Credit cards delivered Q4 revenue of $35 million declining 19% year over year.
Lauren: As we mentioned last quarter, we have seen recovery in organic search traffic in most areas of our business with the exception of credit cards and personal loans and we expect to see this trend continue.
Lauren: We are projecting continued downward pressure during the first part of the year.
Lauren: For the full year credit cards delivered $176 million of revenue declining 16% versus the prior year.
Lauren: Loans generated Q4 revenue of $18 million declining 26% year over year.
Lauren: Our personal loans vertical declined 51% year over year, as we had yet to see a material recovery in our revenue despite a rapidly improving macro environment.
Tim Chan: As Tim mentioned the renewed focus on this vertical as we enter 2025 has resulted in early improvements, suggesting a return to year over year growth in Q1.
Tim Chan: Partially offsetting the declines in personal loans was growth in mortgages.
Tim Chan: Q4 saw mortgage revenue growth, primarily driven by the inclusion of our acquisition of next door lending, which contributed over one point of growth to overall company revenue this quarter.
Tim Chan: As we look forward with the recent rise in mortgage rates as well as the vast majority of household mortgages reported at under 5% rates.
Tim Chan: Have muted expectations in the near term.
Tim Chan: The growth in mortgages outside of the benefit of the acquisition is still primarily driven by strength in home equity products.
Tim Chan: For the full year loans delivered $84 million of revenue declining 17% year over year.
Tim Chan: SMB products delivered Q4 revenue of $26 million declining 7% year over year.
Tim Chan: We continue to see pressure in SMB loan originations with rates remaining elevated and underwriting remaining tight while also seeing increased pressure in our renewables portfolio as the 10 year rates reversed course and began to climb.
Tim Chan: Despite interest rate headwinds in loans, we continue delivering growth with our other product offerings.
Tim Chan: In the current 10 year rate environment, we do not expect to see growth acceleration, but we believe there is a large opportunity to grow both the loans and other products some verticals over the long term.
Tim Chan: For the full year SMB products delivered $110 million of revenue growing 9% year over year.
Tim Chan: Beginning this quarter, we have changed our revenue product category presentation and are now providing insurance revenue as a separate disclosure.
Tim Chan: Insurance products consist of auto life pet and other insurance intended for our consumers.
Tim Chan: Previously insurance was a component of our emerging verticals revenue disclosure, but given the relative size and long term opportunity you will see us breakout this revenue contribution separately.
Tim Chan: Insurance delivered $72 million in revenue growing 821% year over year in Q4.
Tim Chan: We saw an atypical increase versus the third quarter as improving demand from both consumers and partners remained consistent.
Tim Chan: Growth also continued to be aided by our ability to improve the product experience by collecting a bit more information upfront to better route customers to relevant products for them.
Tim Chan: Looking forward, we expect to see strong growth during the first half of the year, but we'll face tougher comps during the second half leading to more muted growth expectations for.
Tim Chan: For the full year insurance delivered $192 million of revenue growing 326% year over year.
Tim Chan: Finally, our emerging verticals finished Q4 with revenue of $34 million growing 7% year over year.
Tim Chan: As a reminder, after the regrouping of both SMB products and insurance revenue emerging verticals consists of areas such as banking investing and international.
Tim Chan: Banking increased 5% year over year as we saw partner appetite remained robust and demand rebound from prior quarter levels. As we believe consumers are re shopping while depository rates begin to slowly decline.
Tim Chan: We expect to return to declining year over year results. During 2025 as we are still cautious that are declining depository rate environment may reduce consumer demand, but landing at a higher watermark then in zero interest rate environment.
Tim Chan: For the full year emerging verticals delivered $125 million of revenue declining 12% year over year.
Tim Chan: Moving on to investments and profitability.
Tim Chan: During Q4, we delivered $16 8 million of non-GAAP operating income above our Q4 guidance range.
Tim Chan: non-GAAP Oi margin was roughly similar to Q4 of the prior year, despite increasing our investment in brand.
Tim Chan: As we look over the second half of 2024, we delivered over $17 million more non-GAAP operating income dollars year over year and roughly three points of margin accretion as we efficiently invested in brand across both quarters as well as saw the majority of the second half benefit from the cost saving measures that we took in July.
Tim Chan: <unk>.
Tim Chan: We also earned $31 million of Q4 adjusted EBITDA.
Tim Chan: In the fourth quarter, we earned GAAP operating income of $8 7 million and net income of $38 6 million.
Tim Chan: Which includes a $37 9 million income tax benefit.
Tim Chan: Our Q4 income tax benefit was mostly driven by a $27 $2 million, one time release of a valuation allowance on certain deferred tax assets after positive indicators, including profitability improved in recent years.
Tim Chan: With the release of the valuation allowance, we recognized a corresponding deferred tax assets, primarily comprised of capitalized research and development costs on our balance sheet.
Tim Chan: Similar to what we've mentioned in previous quarters, we expect to be a cash taxpayer for the foreseeable future.
Tim Chan: Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures.
Tim Chan: Consumers continue to turn to the nurse for their money questions. We provided trustworthy guidance to 19 million average monthly unique users in Q4 down 20% year over year.
Tim Chan: The broad organic traffic challenges that began during Q2 remain the primary driver of the decline and we are seeing the largest pressure to our year over year growth occur in our non monetizing traffic.
Tim Chan: As Tim mentioned, we will begin phasing out our <unk> metric given we no longer believe it is the best measure to correlate revenue growth opportunity as we continue to scale our vertical integration efforts.
Tim Chan: With that being said, we did want to provide a little context on what we're expecting from a traffic standpoint in the near and medium term.
Tim Chan: We expect to continue to see traffic or IMMU use decline year over year with a bit more deceleration in Q1, as we await normalization from these new levels.
Tim Chan: With that being said trends we've seen so far this year would point to a seasonal Q4 to Q1 increase as we've seen in prior years.
Tim Chan: This gives us confidence that we should reach an eventual level of normalization and we currently expect to return to year over year traffic growth sometime early next year.
Tim Chan: If we take a bit of a broader view on the long term growth in our business. Despite these near term challenges and you used this quarter had a five year compounded annual growth rate of 8% showcasing the progress we have made over multiple cycles of increasing consumer demand through the <unk> wallet brand.
Tim Chan: Onto our financial outlook as we enter 2025, we expect revenue growth will be maintained throughout the year. Despite tough comps during the second half, but the degree of growth will be dependent on the timing and size of a recovery in the lending environment.
Tim Chan: There was some level of uncertainty remains we plan to continue providing quarterly revenue and non-GAAP profit guidance and will also provide annual profit guidance as well as qualitative commentary for full year expectations.
Tim Chan: We expect to deliver first quarter revenue in the range of $187 million to $193 million, which at the midpoint with increased 17% versus prior year.
Tim Chan: To give you more color on our Q1 revenue expectations.
Tim Chan: In prior years, we have seen a meaningful seasonal increase in revenue from Q4 to Q1, which you can see is not necessarily reflected in our outlook.
Tim Chan: This is primarily driven by the strength that we saw in insurance at the end of 2024, which is reducing the Q4 to Q1 step up.
Tim Chan: Despite this impact to our typical cadence from Q4 to Q1, the primary driver of year over year revenue growth in the first quarter will still come from insurance.
Tim Chan: And we're also expecting approximately one to two points of benefit from the acquisition of next door lending.
Tim Chan: And while we anticipate continuing to face tight lending conditions across both credit cards and loans, we expect a return to growth in personal loans given recent improvements we've made.
Tim Chan: Moving to profitability, we expect Q1 non-GAAP operating results in the range of a $3 million loss to breakeven.
Tim Chan: Our non-GAAP operating outlook assumes a significant increase in brand expenses year over year as we invest in our first half campaign that is anchored by our Super Bowl placement.
Tim Chan: We believe continuing these investments will benefit the brand in the long term and we will be data driven on the levels at which we spend during shorter timeframe.
Tim Chan: As we look at the rest of the year, we expect to spend less on brand than the prior year for Q2 through Q4 combined all in all netting to a moderate full year increase in our investments.
Tim Chan: We expect to grow non-GAAP operating income dollars versus the prior year across the remainder of 2025 represented in our expectations for full year 2025, non-GAAP operating income of approximately $50 million to $60 million.
Tim Chan: From a macroeconomic standpoint, our guidance currently assumes no material changes to long term rates.
Tim Chan: No material spike in unemployment or inflation.
Tim Chan: And as a result of more moderate recovery and some interest rate sensitive areas of our business across the remainder of the year.
Tim Chan: We also expect that this revenue recovery will come from both unpaid and paid channels that will help with overall profit dollar growth.
Tim Chan: As a result, we will have a larger portion of our revenue growth coming from paid marketing this year.
Tim Chan: So as we've mentioned in the past, we view paid marketing as a means to an end and we'll continue to spend in a disciplined manner with the aim to be paid back within the quarter in which we spend.
Tim Chan: As a result of this traffic mix impact we are moving from a margin percentage target to a margin dollar target as we continue to leverage our brand strength to take share and paid channels.
Tim Chan: When looking out past 2025, we are also replacing our previously shared margin percentage target with a margin dollar target and we now plan to deliver at least $80 million of non-GAAP operating income in 2026 with this continued level of profitability growth depending on the time.
Tim Chan: <unk> of the recovery in our lending portfolio.
Tim Chan: We enter this year optimistic about the future and the work our nodes have done to set us up to execute on our vision.
Tim Chan: We know we have a responsibility to our users to help them navigate their financial questions all while maintaining our long term orientation prioritizing trust and continuing to improve our vertical experiences across cycles.
Tim Chan: Before we move to questions I would also like to take a moment to thank Tim and all are nerds for allowing me to be part of your journey. The past four years I know the team is set up to do amazing things and I will continue to be a proud nerd watching your success from afar.
Speaker Change: With that we'll open it up for questions. Operator. Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
And our first question comes from Ross Sandler of Barclays. Your line is open.
Ross Sandler: Hey, Good morning, just two quick questions for me.
Speaker Change: So first on insurance I mean, this segments basically gone from no.
Ross Sandler: Nothing a year ago to now.
Ross Sandler: Our largest segment by a decent amount so I guess, how much of that is from kind of changing the flow traffic patterns through this I think you mentioned collecting more information.
Ross Sandler: And maybe.
Ross Sandler: Maybe tweaking.
Ross Sandler: The direct organic traffic patterns versus just running lots.
Ross Sandler: Lots of incremental performance marketing to insurance landing pages could you talk about how youre kind of balancing that with in.
Ross Sandler: In the future of other sectors other categories start to kind of pick back up again can you kind of rebalance things accordingly.
Ross Sandler: That's the first question kind of a high level and then the second one along the <unk> guide assumes a pretty hefty amount of margin contraction.
Ross Sandler: I know youre not guiding to margins anymore.
Ross Sandler: But is that the Super Bowl commercial plus other factors just any additional color on the <unk>.
Hi, guys go why Oi margins either way thanks, a lot.
Ross Sandler: Sure I'll kick it off.
Ross Sandler: Ross I think you're spot on.
Speaker Change: We have improved the flows to the site.
Ross Sandler: Personalizing the user experiences more.
Ross Sandler: That's really tied to enabling us to be more proficient in performance marketing.
It is worth calling out to the end market is also growing auto insurance costs are up over 50% over the last five years as inflation and rising risk drive up premiums and this means the end market is expanding as well and then the last thing to think about there to us.
Ross Sandler: The direct channel, where we primarily play is taking share from the agent channel.
Ross Sandler: There is also another structural tailwind for us.
Ross Sandler: In terms of the durability of that consumer demand in auto insurance, depending on which data source you are looking at new policies in 2024, we're about 20% to 30% higher than in 2023, and 2023 was an easy comp because it was a hard market. So there aren't a lot of options to switch back then that gives us confidence that these current trends.
Ross Sandler: <unk> are sustainable.
Ross Sandler: And so looking ahead, we see far lower growth rates in insurance as we left the hard market, but we're really encouraged by the level of positive feedback we're getting from partners about the quality of sharper shoppers coming from <unk>. So we think our brand is a real differentiator here.
Ross Sandler: To the point about how this affects things in other verticals pickup not not a ton. It does make me very optimistic though that.
Ross Sandler: Like insurance a lot of lending verticals have risk based pricing so growing our top of funnel there can sometimes be dependent on more personalization.
Ross Sandler: And serving routing customers to the right options for them. So we think that some of the things we've learned and improved on over the cycle will apply to areas like personal loans and mortgages as well over the next cycle.
Ross Sandler: Perfect and before I get to the Q1 margin Guide Ross I just wanted to point out again like as we've been scaling our paid monetizing traffic, where we see really strong returns and as you rightly called out we certainly see those in insurance right now.
Ross Sandler: We're going to continue to be disciplined we do this with all of our performance marketing spend versus the means to achieve certain revenue expectations. So we're going to lean in where we see good returns.
Ross Sandler: So now to answer your second question around the Q1 guide on margin. So as a reminder, the Q1 guide was a $3 million loss to breakeven.
Ross Sandler: The midpoint implies we will see seven points of margin margin degradation versus the prior year and this is the result of two big things, we're spending more year over year in brand and the mix of performance marketing has become a larger.
Ross Sandler: Part of the business so real quick on year over year, while we expect to grow revenue year over year. We will continue to have a larger portion of that revenue coming from paid marketing as we will continue to scale, especially in areas like insurance and we're also seeing impacts from the organic traffic headwinds that intensified during the second half of last year.
Ross Sandler: Thank you.
Speaker Change: Our next question comes from Justin Patterson of Keybanc. Your line is open.
Speaker Change: Great. Thank you very much and best of luck with the new opportunity Lauren.
Justin Patterson: I was hoping you could put a finer point on the shift in traffic strategy.
Justin Patterson: Do you observe among new use or in Rois on marketing channels that drove this decision to focus more on quality of the relationships and how does this change your view of long term growth profile you outlined around this time last year. Thank you.
Speaker Change: Yes, so maybe I'll just reiterate some of the comments around our choice to shift from the metric of Mou and then Tim if you want to add some thoughts on that and then we can talk a little bit about sort of the longer term, but.
Speaker Change: Over the past few quarters growth has been inversely correlated between MDU used in revenue. So and you use have not been a good proxy and as Jim did mentioned in remarks, given our focus on quality over quantity through vertical integration, we do not believe it and you use our the best measure of our progress in these areas.
Speaker Change: We were able to prioritize and show meaningful <unk> growth, while we are solely focused on our digital marketplaces, but as we're shifting resources to longer term priorities, we're going now going our internal management teams on non gap, Hawaii and not and you use.
Speaker Change: Speaking to the longer term growth profile I mean, so we've got three growth pillars right. The second one and the third one vertical integration and registration and data driven re engagement. So yes. The bang for Buck in terms of getting a lot of our existing users and deeper relationships.
Speaker Change: So high relative to.
Speaker Change: Growing the top of funnel. So yes in my prepared remarks I talked about.
Speaker Change: Our next door lending example, I mean, you think about someone coming in and reading about mortgage rates being quite less valuable than someone who we actually get on the phone with them.
Speaker Change: Broker transaction with rate and yet those are equivalent meus. So at the operational focus has really turned.
Speaker Change: Doing better with with them you usually have yes and.
Speaker Change: And tier sort of last point the.
Speaker Change: The shift away from Meus does not change our perspective on the long term revenue targets.
Speaker Change: As our Q4 performance and our Q1 guidance shows that we've gotten back to and expect to continue to deliver double digit growth and that's still in the face of an extremely challenging end market for many of our vertical still including credit cards and loans.
Speaker Change: Okay.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Our next question comes from Ralph Shakur of William Blair. Your line is open.
Ralph Shakur: Hi, good afternoon. Thanks for taking the question one for one on one for Tim Lauren I think last quarter or two you talked about implying a little bit more conservatism in your outlook to guidance or maybe your approach to guidance I'm. Just curious as you thought about Q1, 25 and 26 new targets.
Speaker Change: What sort of conservatism was implied there.
Speaker Change: As you've applied sort of historically, that's my first question and I'll have Paul for them.
Paul: Yeah, perfect. So yes, we talked about over the last couple of quarters, one we're still facing a ton of headwinds across many of our verticals.
Paul: And then we've also talked about a little bit of volatility that we're seeing in some of the things like our organic search traffic.
Paul: We remain committed to disciplined spending we haven't changed the game plan that we have and we will continue to represent our guidance with sort of the best estimates of what we're seeing today and where we believe we can execute and deliver.
Tim: And then Tim.
Tim: Throughout the many years and I don't know if theres been a lot of algo changes at Google and the market has responded.
Speaker Change: As you are sitting here today and sort of operating this business, obviously for a while here how different do you think these changes are to the business overviews.
Speaker Change: Some digital buyers in saying that.
Speaker Change: The ads from the generated from Gen II are actually performing better than some of the organic.
Speaker Change: Results. So just kind of curious what's your confidence that this is something you'll be able to navigate longer term versus your previous history. Thanks a lot.
Speaker Change: Okay.
Yes.
Speaker Change: Splitter a.
Speaker Change: Between kind of the shorter term stuff, we're seeing in longer term thoughts I mean in the near term. There are two drivers here right, which is one is more ads and modules on top of the search results and the other factor is rank where.
Speaker Change: In the very recent past financial institutions, and some government websites are winning in some areas where they traditionally haven't.
Speaker Change: As Ive alluded to in past calls is a bit of a head scratcher when considering consumer intent. So we do think this period of frenetic testing will eventually stabilize and when that happens it should play to our favor.
Speaker Change: Near term.
Speaker Change: I do think that.
Speaker Change: It's important to look at broader industry trends right.
Speaker Change: So.
Speaker Change: First AI search engines or chat bots are they taking share from traditional search engines I mean from what we can tell not really if you like tops down more people are using search engines than they did last year, but you also see triple digit growth in AI usage, which says to me that people are basically just asking more questions.
Speaker Change: But they werent asking before.
Speaker Change: Second the.
Speaker Change: Things like AI overviews.
Speaker Change: How is that affecting the ecosystem.
Speaker Change: So I know, we're not focusing on <unk> operationally, but it's helpful to understand that if simple questions have simple answers and if a search engine can serve that up in a faster way that consumers prefer and thats good for the ecosystem.
Speaker Change: For Us we're seeing these features do a really good job of answering simple educational questions and thats affecting traffic to some of our noncommercial pages.
Speaker Change: Has not been the case, yet for our monetizing pages, which are fundamentally just a little more complicated, but if you need to shop for a mortgage for instance, you really need to go through a marketplace experience.
Speaker Change: So on balance we think that this period of frenetic testing will stabilize we've seen a few things like this in the past and we can grow from there.
Speaker Change: Okay, that's really helpful. Thanks.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Pete Christiansen of Citi. Your line is now open.
Speaker Change: Thank you good evening, Tim I guess now with the <unk>.
Speaker Change: The revised traffic strategy, which makes a ton of.
Speaker Change: <unk>.
Speaker Change: Engagement wise all of that but how are you thinking about competitive share and how important is that still a factor.
Speaker Change: What are your partners when they are evaluating spending on one platform versus another.
Speaker Change: Love to hear your thoughts there and competitive market share.
Speaker Change: Yes, so the high level I think gives partners as being quite quantitative and analytical when theyre looking at partners like US It comes down to what's the LTV of the customer that they are driving through.
Speaker Change: And anecdotally, we have consistently done very positive feedback and many different verticals that are our customers understand the products. They understand why this is a great choice for them.
Speaker Change: That leads to good outcomes for both the partners and for <unk> wallet.
Speaker Change: So in terms of.
Speaker Change: Sure I don't really think of it as a.
Speaker Change: As zero sum game between different partners I think.
Speaker Change: Financial institution is basically making your LTV to CAC calculation and Quants as many customers as they can get typically.
Speaker Change: We tend to be a preferred channel there.
Speaker Change: That's helpful.
So the deeper engagement.
Speaker Change: Being I guess more valued by by your partners rather than just straight up top of funnel share.
Speaker Change: That's helpful.
Speaker Change: Great.
Speaker Change: Thank you.
Speaker Change: Okay.
Michael: Our next question comes from Michael <unk> of Morgan Stanley. Your line is open.
Speaker Change: Hey, guys. Thanks for taking my question, Tim I, just wanted to get your high level perspectives on what you're seeing in the marketplace from a competitive perspective post CCP at implementation.
Speaker Change: We're more insulated than others, just given the lack of lead resale, but would be great to get your thoughts on broader pricing trends in the industry and whether or not some of the per unit pricing.
Speaker Change: Some of the lower volume.
Speaker Change: Yes, I'd say.
Speaker Change: Given that.
Speaker Change: A lot of that implementation has been stayed we haven't seen much of an impact flowed through.
Speaker Change: From a consumer perspective.
Speaker Change: Obviously, a little disappointed that we havent gone down that path.
Speaker Change: But not a huge impact thats visible to us.
Speaker Change: Okay. That's helpful. Maybe just on personal lines.
Speaker Change: If I look at some proxy as a broader personal loan providers in this space what they grew volumes in 'twenty four there either.
Speaker Change: Quite a lot or effectively flat and I think you mentioned your personal lines business was down about 50, or so does that imply that in periods of lower unit volume.
Speaker Change: Second derivative from a pricing perspective has lagged and perhaps more pronounced than the volume reduction.
Speaker Change: Well.
Speaker Change: It's not my agreed I think what's really going on is like Youre, saying the macro has markedly improved the market is back lenders are seeing good underwriting writing results capital is flowing back in.
Speaker Change: We just havent been focused here, so we have reapplied focus.
Speaker Change: Especially exiting Q4 and beginning of Q1 and are starting to see really big improvements I mean, if you. If you look at our Q4 performance here like you are saying down 51% year over year and were expecting to be up year over year. In Q1. So you can kind of gather that we've made a ton of improvements to our tunnel.
Speaker Change: Helpful. Thanks.
Speaker Change: Thank you.
Conference Operator: Our next question comes from Jed Kelly of Oppenheimer <unk> Company. Your line is open.
Speaker Change: Hi, This is Josh on for Ken Thanks for taking our questions can you just talk about some of the opportunity for <unk>.
Speaker Change: Our vertical integration and how we should be thinking about if it's more of a onetime opportunity like mortgages or are you thinking about higher LTV product like financial advising.
Speaker Change: Short answer is yes, I mean anywhere where there is a sticky customer relationship where financial guidance is helpful to consumers and there is sometimes this element of I don't know who they can trust.
Speaker Change: Those attributes are making category prime candidates for us to vertically integrate.
Speaker Change: Yes.
Speaker Change: Great and then.
Speaker Change: I guess about the brand brand spend could you talk about some of the efficiencies you're seeing given the spend around sports over the past few months.
Speaker Change: So big picture on brand spend and I'd say, we're very quantitative when it comes to thinking about our spend and we feel good about our process. Obviously, we strive to get smarter each year with both our creative and where we spend money.
Speaker Change: So you can assume that our goal here I mean, some of our patterns have changed over the past few years were heavier in areas like sports as an example, but it's something that we're just trying to get a little bit better at every incident.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Our next question comes from Youssef Squali of Jewish Securities. Your line is open.
Youssef Squali: Awesome. Thank you for taking the question so I have to Tim on the sustainability of strength in insurance, obviously grown 800% is really impressive the only issue is youre going to comp that at some point. So when we start comping that which I'm assuming is some sometime very late this year and then early next year.
Speaker Change: <unk>.
What do you think is the steady state growth in insurance and other words with all of the things that you're doing beyond just the market.
Speaker Change: Proving do you what do you think the steady state.
Speaker Change: Both grid and insurance and then.
Speaker Change: And then on the.
Speaker Change: Adjusted EBITDA guide, particularly beyond Q1 is the input can you maybe double click on areas of investments beyond brand and the outperformance market in which my understanding from what you said is that it's going to be materially up what about the other line items on the P&L will they also be up where it is.
Speaker Change: The increase in that spend and the decrease in margin driven by the brand and the performance marketing spend thank you.
Ed: Thanks for the question on uninsured clearly this is Ed.
Ed: In early part of our growth curve here at <unk>. So yeah in the very long term I think.
Ed: Within the insurance market.
Ed: The drivers are something like GDP plus risk.
Ed: Plus take rate right and so I think you would expect some slightly above GDP growth there I mean to.
Ed: Historically, you've seen long periods of.
Ed: Price competition and you've seen in the past five years periods of huge price increases. So I think that affects the market and then the last thing I would think about there is.
Ed: Direct carriers are taking share from agents so.
Ed: And then another structural tailwind for the digital market. So putting all those things together I think it's hard to come up with an exact number but.
Ed: So those are the factors to consider.
Ed: On your full year margin question.
Ed: Just go back to some of the commentary around non-GAAP operating income.
Ed: We expect full year non-GAAP <unk> to be in the range of $50 million to $60 million and as you can see from the Q1 guide, which was a $3 million loss to breakeven non-GAAP <unk> dollars are going to be produced during Q2 through Q4, and the largest driver of this flip to income dollars versus the Q.
Ed: One guide is primarily coming from lower seasonal brand spend versus Q1 levels and keep in mind, we plan to invest less in brand on a year over year basis for those remaining quarters. I know you asked about adjusted EBITDA. So I'll just remind everyone. As we've mentioned previously non-GAAP, Hawaii will be the performance metrics that we hold our count ourselves.
Ed: <unk> two going forward.
Ed: And I just wanted to call out that.
<unk> EBITDA non-GAAP of why some of the biggest differences between those or that are non capitalized some of the savings we're delivering will come through stock based compensation, which is not incorporated into our adjusted EBITDA metric.
Ed: And I think I heard something in there too about.
Ed: The cost base growth.
Ed: We're fairly mature there and strive to keep non non variable costs growing at a slower rate.
Speaker Change: Got it okay. Thank you Bob.
Conference Operator: Thank you I'm showing no further questions at this time I would like to hand, it back to management for closing remarks.
Conference Operator: Alright, Thanks, all for your questions as always I want to thank the <unk> for their hard work and commitment to our consumers and our business, reflecting on the past year and the opportunities ahead I'm incredibly energized by how we have passed the way to build direct engaged relationships with consumers and Smbs, while 2024 was not without.
Conference Operator: Challenges, we tested and learned at a rapid rate made key investments and remain committed to relentless improvement theres more to come thanks, everyone.
Conference Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.
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